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VW to build Golf EV at former Phaeton plant; CEO says major battery factory likely to be approved

22 Nov 2016IHS Markit Automotive Expert

VW is accelerating its electromobility programme which will involve committing to spending EUR3.5 billion on shifting the company towards being a future mobility provider.

IHS Markit Perspective

Significance: VW will build the latest version of the electric Golf at the dormant Dresden plant, where it had previously manufactured the Phaeton. Meanwhile, CEO Michael Mueller has confirmed that a major investment in battery cell production in Germany is likely, after confirming that the company would build a "trial" plant last week.

Implications: These investments will be part of the EUR3.5-billion programme of investments in future mobility and the stated mission to shift VW from a conventional carmaker to a provider of mobility services, with production of the new Golf EV beginning in March 2017.

Outlook: VW is now rapidly increasing its investment in EVs after a slow start, with the diesel emissions affair effectively forcing the company's hand. It appears that VW's big investment push in electrification may coincide with the start of the tipping point in terms of cell cost and infrastructure which will mean that electric vehicles become a more viable proposition for a wider variety of customers.

The Volkswagen (VW) Group has announced plans to build the latest iteration of the electric variant of the Golf at its dormant plant in Dresden, according to a company press statement. The facility was originally built to manufacture VW's Phaeton F1-segment limousine, which finally ended production in March this year after an unsuccessful 14-year run. As a result the Dresden plant will receive new investment to become the VW passenger car brand's centre of electromobility, having been used as a museum since the end of Phaeton production. The e-Golf will also be manufactured at the main VW plant in Wolfsburg. VW will invest EUR20 million in changing Dresden into a "Center of Future Mobility". Production will initially restart at the factory in a single-shift operation with the factory also acting as a customer pick-up centre for all the VW passenger car brand's EVs and PHEVs, including the e-up!, the e-Golf, the Golf GTE and the Passat GTE. The latest e-Golf was first shown at the Los Angeles Auto Show last week, and features 50% more battery capacity than the previous model with a 36 kilowatt-hour lithium-ion battery pack, compared with 24 kWh in the outgoing model. This allows the new model a range of up to 124 miles as opposed to the 83 miles of the outgoing model.

In addition, VW Group CEO Matthias Mueller has confirmed that the company is likely to proceed with a major investment to build a battery cell manufacturing plant in Germany which will further bolster the group's efforts in the area of electrification. The facility has been likened to the giant Gigafactory facility that Tesla is building in Nevada but the project has yet to be confirmed, despite VW stating on Friday it would build a "pilot plant" in Germany. However, it seems, according to Mueller's comments, that work to build a full-scale battery plant is likely to start sooner rather than later. In an interview with the Frankfurter Allgemeine Sonntagszeitung the CEO said, "If more than a quarter of our cars are to be electric vehicles in the foreseeable future then we are going to need approximately 3 million batteries a year. Then it makes sense to build our own factory."

Outlook and implications

The VW Group's efforts to accelerate its move towards electromobility are gradually coalescing and gaining momentum after a slow start in comparison to other OEMs such as Renault-Nissan and Toyota's hybridisation programme. In part the move has been forced as the group and the main passenger brand looked to improve its image in the wake of the diesel emissions affair. However, VW may also have been shrewd in delaying its investment given the slow take-up that electric vehicles (EVs) have had so far. Back in 2009, Renault-Nissan claimed that by 2020, 10% of the global light-vehicle market would be EVs, and it looks like it will miss this target by more than tenfold. VW's target of having 25% of its total sales as EVs by 2025 still looks ambitious, but given anticipated improvements in battery power density and cost this target does not look as far off as it once did. BMW CEO Peter Schwarzenbauer said last week that Mini was delaying the launch of the EV variant of its hatchback until 2019. Schwarzenbauer is planning for cell cost to have fallen to a level where an EV Mini will make commercial sense and offer a genuine premium city car EV with a competitive range and VW could also benefit from this timescale with the iQ EV which was shown at the Paris Motor Show due to debut in 2020. The decision to turn the Dresden plant into the VW brand's electromobility centre, like Audi has done with the Brussels plant, makes strategic sense and should breathe new life into a modern plant which was underutilised during the production of the Phaeton.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.